Wall Street is once again banking on the TACO trade because they've been 'burned' by believing Trump before | Fortune

"Analysts are, understandably, uneasy. Their concern stems from President Trump's claim that a bevy of European nations would face new tariffs within a matter of weeks if they did not support America's bid to purchase Greenland, currently a territory of NATO member country Denmark, which is not putting the island up for sale. At the time of writing, the VIX volatility index is up 27% over the past five days, its highest since April last year when the Oval Office announced sweeping tariffs on every nation on the planet."

"While markets in the U.S. are yet to have the opportunity to react to the news after being closed for the Martin Luther King holiday, assets in Europe are looking pale. Germany's DAX is down 1.57% at the time of writing, London's FTSE is down 1.4% and France's CAC 40 is down 1.2%. Asia is similarly queasy, Tokyo's Nikkei 225 is down 1.11% while Hong Kong's Hang Seng Index is down 0.29%."

"Meanwhile, gold prices-a barometer for investors fleeing to safety-are climbing higher still, up 1.17% overnight. However, the damage could have been worse: investors don't even need to cast their minds back a year for inspiration. Markets plummeted following Trump's Rose Garden address on April 2, his so-called Liberation Day, despite the fact many of his threatened tariffs were delayed within a matter of days. And so the 'TACO' trade was born: Trump Always Chickens Out."

Investors are trying to remain level-headed as U.S.-Europe tensions escalate after President Trump threatened tariffs on several European nations tied to a bid for Greenland. Volatility rose sharply, with the VIX up 27% over five days to its highest level since last April. European and Asian equity indices declined, and S&P 500 futures were weaker. Gold climbed as investors sought safety. Markets previously plunged on tariff threats but recovered when many measures were delayed, spawning the 'TACO' trade. Deutsche Bank cautioned there is room for bigger moves and questioned the durability of potential duties.

Read at Fortune